The average new Australian owner-occupier home loan for March 2022 was $599,992 according to the Australian Bureau of Statistics (ABS).
But that figure doesn’t tell the full story of Australia’s mortgage market.
With interest rates tipped to continue to rise over the coming months and years, we look at the reality behind Australia’s mortgages and explore whether it is becoming more difficult to service the average home loan.
Average mortgage in Australia by State
An average home loan that’s now almost $600,000 may sound impressive in some parts of the country. However, mention that figure to someone from Melbourne, Canberra or Sydney, and they probably won’t believe you because in these cities, the average new mortgage is much higher.
Here’s how the average new mortgage breaks down state-by-state as at March 2022, according to the ABS.
State | Amount |
New South Wales | $762,238 |
Victoria | $629,727 |
Queensland | $516,615 |
South Australia | $463,127 |
Western Australia | $455,536 |
Tasmania | $451,438 |
Northern Territory | $421,500 |
Australian Capital Territory | $636,831 |
Source: ABS Lending Indicators March 2022
Average mortgages in Australia over time
Interestingly, the average new mortgage has fallen since its peak in January 2022 of $617,608. The average has also fallen in most States and Territories over that time.
The biggest decline in the average mortgage has been in NSW, where the average new home loan was as high as $803,235 in the first month of 2022.
Despite this fall in the average new mortgage size over the first half of 2022, one trend is clear: the earlier you entered the market, the smaller your mortgage is now likely to be.
For instance, the average mortgage in 2008 was just $243,600, or $144,500 less than it is today. In March 1998 it was $114,700 and in March 1988 it was just $55,300.
Costs of an average Australian Home Loan
The average Australian mortgage has risen dramatically so that it now accounts for over 88% of the median house price, which stood at $684,000 in March 2022 according to PropTrack.
What is significant though is that the cost of servicing a loan has fallen sharply, especially in the last decade.
In March 2008, the official interest rate stood at 7.25% and the average advertised standard variable rate at 9.35%, according to the RBA. In March 2022, the official interest rate was just 0.1% and the average discounted variable rate stood at 3.45%, according to ABS data. Until recently, many homeowners were also able to take out fixed rate home loans at close to 2%.
With interest rates rising, that average variable rate is likely to start rising, with many banks likely to raise their rates in line with any RBA rate hikes.
Monthly repayments on a $600,000 home loan
As interest rates rise, repayments are likely to rise too. For instance, the monthly repayments on a 30-year principal and interest home loan for $600,0000 would be around $2,218 if a borrower was paying an interest rate of 2%. If the interest rate rose to 3.5% on the same home loan, repayments would jump to around $2,694 – or $476 more.
Here’s an estimate of how much it would cost to service the average mortgage in each State and Territory with an interest rate of 3.5% vs 2.0%
State | Average home loan | Interest rate 2% | Interest rate 3.5% |
NSW | $762,238 | $2,817 | $3,423 |
Vic | $629,727 | $2,328 | $2,828 |
Qld | $516,615 | $1,910 | $2,320 |
SA | $463,127 | $1,712 | $2,080 |
WA | $455,536 | $1,684 | $2,046 |
Tas | $451,438 | $1,669 | $2,027 |
NT | $421,500 | $1,558 | $1,893 |
ACT | $636,831 | $2,354 | $2,860 |
Australian average | $599,992 | $2,218 | $2,694 |
* Based on a 30-year principal and interest home loan with no added fees.
Total interest paid on a $600,000 home loan
Higher repayments also mean that you’ll be paying more interest over the life of the loan. If the interest rate stayed consistent over the entire life of the same $600,000 home loan mentioned above, you’d pay around $198,375 at 2% interest. At 3.5% that would rise to $369,932 – or almost double.
Here’s an estimate of how much interest you would pay over the life of a home loan at 2% or 3.5% based on the average mortgage in each State and Territory.
State | Average home loan | Total interest paid when interest rate 2% | Total interest paid when interest rate 3.5% |
NSW | $762,238 | $252,019 | $469,966 |
Vic | $629,727 | $208,207 | $388,265 |
Qld | $516,615 | $170,808 | $318,525 |
SA | $463,127 | $153,124 | $285,546 |
WA | $455,536 | $150,614 | $280,866 |
Tas | $451,438 | $149,259 | $278,339 |
NT | $421,500 | $139,361 | $259,880 |
ACT | $636,831 | $210,555 | $392,645 |
Australian average | $599,992 | $198,375 | $369,932 |
Find the best home loan for your needs
One of the most effective ways to reduce the amount of interest you’ll pay on your mortgage is to shop around and find the right home loan for your needs.
Even with interest rates rising at the moment, the lending market is extremely competitive so you’re likely to find you’ll save money by switching lenders and refinancing your loan.
Think also about your own financial fitness and whether you have extra money you can devote to your home loan via a redraw facility or offset account.
After all, the more you can put into your mortgage now, the less interest you’ll pay in the long run and the sooner you’ll be mortgage free.
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